In three installments, I will share three Employment Contract Terms that benefit Payroll and HR, and Finance as well.
Tip 2: Do not guarantee net salaries in employment contracts.
Generic High Tech Inc., a hypothetical company, is entering an Eastern European country for the first time. General Manager, Pete, finds the perfect candidate, Svetlana. Svetlana reviews the contract and makes a change to her salary from gross to net. Pete asks why, and Svetlana tells Pete that this is usual practice in her Eastern European country. She also points out that the contract is fixed for two years, and she wants to know exactly what she will be paid. Pete is concerned and he knows Sophie, the payroll director, to be savvy about employee pay. He shows Sophie the contract, as well as Hugo, the HR Director.
Sophie and Hugo tell Pete: Do not accept a net salary in an employment contract. Why not?
Therefore, don’t set a precedent. If you have this situation now, it may be painful but possible to change the contracted salaries from net to gross for everyone. In practice, this has been successful at organizations that bring everyone globally in line to be paid gross and not net.